The Economy’s Crisis Ended Under Obama, But Its Long-Term Problems Didn’t

This is In Real Terms, a column analyzing the week in economic news. Comments? Criticisms? Ideas for future columns? Email me or drop a note in the comments.

To understand the dueling narratives of the U.S. economic recovery, look no further than the stories atop the country’s two leading newspaper websites Thursday morning. The New York Times featured a long Sunday magazine story by Andrew Ross Sorkin in which President Obama defended his economic record. (The story was mostly sympathetic to Obama’s argument.) The Wall Street Journal, by contrast, led with the news that the U.S. gross domestic product had grown at a rate of just 0.5 percent in the first three months of the year, slower even than economists’ already pessimistic expectations.

The two stories were discordant but not contradictory. Nearly seven years after the recession ended, the recovery has been at once impressive in its resiliency and discouraging in its failure to gain speed. The usual debate over Obama’s economic legacy hinges on whether he deserves credit for avoiding the worst possible outcome (see also: Europe) or blame for failing to achieve something better. But that argument misses something deeper, which is that Obama inherited two distinct sets of economic problems when he took office: the ones the recession caused, and the ones it merely laid bare. He has made far more progress on the first set.

For all the progress, the recovery has been frustratingly slow, and it remains incomplete. Long-term joblessness remains high by historic standards, and even many people with jobs remain worse off than before the recession. But the recovery is real: By virtually any measure, the economy is far better than when Obama took office. (How much credit Obama and his policies deserve for that improvement is a separate debate.)

But Obama has made less progress on a set of deeper, structural problems that began years or even decades before the recession. Among them: slow growth in wages and productivity; rising inequality; falling labor force participation, especially among men; and the decline of manufacturing and the failure to find a new source of middle-class jobs to replace it. The bubble-driven boom of the mid-2000s papered over some of those problems — laid-off manufacturing workers got jobs in construction, families offset reduced incomes by borrowing against their homes — until the housing bust revealed them. The recovery has done little to address these issues; many of them have gotten worse.

Obama isn’t to blame for those problems, which long predate his presidency, and it isn’t clear how much he could have done to solve them even in a perfect world. But they are a big part of why voters are angry about the economy despite so much short-term progress. In new research released this week, MIT economist David Autor and a group of coauthors found that communities that lost jobs to China1 have become more politically polarized in recent years than parts of the country that fared better. That is consistent with my own anecdotal reporting in Iowa last fall, in which voters expressed long-term anxiety amid present-day prosperity.

In his interview with Sorkin, Obama blames voters’ frustration in part on his own administration’s communications failures. But he seems to grasp there is also something deeper at work. Americans, Obama told Sorkin, “have a sense that it’s a little more of a struggle for them than it might have been for their parents or for their grandparents.” It will be up to Obama’s successor to try to change that.

Rough waters

A group of Washington D.C. wonks2 this week rolled out a game, “The Fiscal Ship,” that lets players try to tackle some of the nation’s biggest challenges — inequality, aging infrastructure, climate change — while keeping the fiscal house in order. If that sounds like the kind of deathly boring “game” you were forced to play in 10th-grade civics … well, let’s just say that the makers of the Call of Duty franchise needn’t lose any sleep.

But entertainment value aside (and it’s more fun than it sounds), the simulation does an admirable job of illustrating the tradeoffs that policymakers face. It’s hard to cut taxes, increase defense spending and protect Social Security all at the same time, as many Republican politicians pledge to do. And it’s hard to fight inequality and improve college affordability without raising taxes on the middle class, as Democrats routinely promise. Or, at least it’s hard to do all those things without running huge deficits, something both parties generally say they want to avoid.

There is one huge difference between “The Fiscal Ship” and fiscal reality, however: The game has a single set of rules that everyone playing is bound by. In the real world, the fight over the rules is at least as intense as the fight over the policies themselves. To win the game, for example, players must keep the national debt to 75 percent of gross domestic product, roughly the level it’s at now. But plenty of liberals argue the debt can rise well above its current level without posing any serious economic threat; budget hawks, meanwhile, think it’s already too high.

Or take the impact of the policies themselves: In the game, every proposal — raising taxes on the wealthy, cutting government benefits — has agreed-upon costs and benefits. In the real world, those impacts are the subject of vigorous debate. And the game completely ignores how policies would affect the larger economy, what’s known as “dynamic” effects. The game’s designers argue that estimating the effects of every policy would be impractical, which is probably true — but that doesn’t make those effects any less real.

Balancing conflicting policy priorities is hard and important work. But before that game can even begin, the players have to agree on the rules.

Unlicensed

Last week I wrote about how occupational licensing laws are hurting young people and older displaced workers. But there’s another group that might be hurt by the rules even more: people with criminal records.

According to a new report from the National Employment Law Project, a liberal advocacy group, thousands of laws across the country either prohibit or discourage people with felony and even misdemeanor convictions from holding licenses required to work as athletic trainers, funeral directors and even barbers. The bans often have little if anything to do with the particular job or the nature of the offense, and in many cases they last a lifetime.

Policymakers are aware of the problem. Some 39 states have passed laws that aim to make it easier for people with records to get licenses. But according to the NELP report, most of those laws have been, at best, minimally effective. The group recommends a variety of steps, including giving applicants a chance to demonstrate their rehabilitation and removing hard-to-define requirements such as “good moral character.” There are some signs of progress. NELP counts 11 state legislatures that are considering bills to address licensing barriers, often with bipartisan support.

Number of the week

We’re just weeks away from the start of high school graduation season, but if the class of 2016 is anything like the class of 2015, most of this spring’s graduates will be continuing their education in the fall. According to data released by the Bureau of Labor Statistics on Thursday, 69.2 percent of 2015 high school graduates were enrolled in college last October, the highest enrollment rate since 2009. As has been the case for years, enrollment was higher among women: 72.6 percent of women from the class of 2015 headed to college in the fall, compared to 65.8 percent of men. (That represented a slight narrowing of the gender gap compared to 2014.)

College enrollment fell in the years immediately following the recession, which seemed to suggest the improving labor market was leading some young people to skip college and head straight to work. But the decline may just have been a blip: Enrollment is now nearly back to its recession-era peak.